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Lew looks set for $200m win

Sue Mitchell, Sarah Thompson

Dogged investor: Solomon Lew's 17-year holdout as a minority shareholder in the clothing retailer could be ending.

The 17-year war between veteran rag trader Solomon Lew and South Africa's Woolworths Holdings appears to finally be over.

Mr Lew is set to make a $200 million-plus profit from blocking stakes in David Jones and Country Road, after forcing the South African retailer to make a $213 million mop-up bid for the clothing group - and salvage its $2.2 billion bid for David Jones

But Woolworths has been forced to deny it has done a side deal with Mr Lew, and has played down concerns that the mop-up offer could trigger ''collateral benefits'' rules aimed at ensuring all shareholders are treated equally.

Mr Lew emerged with 9.9 per cent of David Jones last week and was threatening to block the scheme of arrangement unless Woolworths bought out his stake in Country Road at a massive profit.

The veteran retailer's high-stakes game of bluff appeared to have paid off on Tuesday when Woolworths offered to buy Mr Lew's 11.8 per cent stake and shares held by about 180 minority investors for $17 a share, almost four times their value in January and nine times the price paid by Mr Lew - conditional on the David Jones acquisition going ahead.

The former Reserve Bank board member and Coles Myer chairman declined to comment on whether he would accept Woolworths' offer for Country Road and vote in favour of the David Jones scheme.

If Mr Lew sells both stakes it will end a 17-year impasse at Country Road and add another $200 million to the rich-lister's coffers.

The David Jones and Country Road stakes are held by Mr Lew's private company, Australian Retail Investments. His listed vehicle Premier Investments has another $300 million in cash and has been eyeing both department stores after hiring more than a dozen former Myer and David Jones executives.

Despite the Country Road bid being tied to the David Jones deal, Woolworths is adamant there is no special arrangement to buy out Mr Lew to secure his support for the David Jones acquisition.

''There has been no prior agreement with Mr Lew regarding the Country Road offer,'' a Woolworths spokesman said.

''The offer is now open for Mr Lew and all other minority shareholders in Country Road to consider.''

So-called ''collateral benefits'' rules are aimed at ensuring all shareholders are treated equally. Under the rules, a bidder must not give a benefit to a person where that benefit is likely to induce him to accept the offer and where the benefit is not offered to all shareholders.

Collateral benefits rules apply to takeover offers, not schemes of arrangement. But the Australian Securities and Investments Commission and the Takeovers Panel believe the principles should also apply in schemes. If ASIC, the panel or David Jones' minority shareholders raised concerns, the deal could be blocked in the Federal Court.

The $17-a-share cash offer values Country Road at $1.76 billion or more than 30 times 2013 historical earnings per share, (which do not include a full year of earnings and synergies from the 2012 acquisition from Mimco and Witchery).

In comparison, Woolworths' $4 a share cash offer for David Jones represents a multiple of 21 times historical earnings. Until this week it was the highest multiple paid for an Australian retailer since Wesfarmers bought Coles in 2007.

It is understood that Woolworths was always planning to buy out the minorities in Country Road to give it 100 per cent access to cash flows.

However, it is not understood why Woolworths, which owns 87.8 per cent, did not make an offer to buy out the minorities in Country Road at the same time that it launched the bid for David Jones.